Canadian jobs data beats expectations, cooling 50 bps rate cut bets and boosting the CAD.

Canada's job market performed well in September,Foreign exchange blacklist exceeding market expectations, which cooled the market's anticipation of a substantial rate cut by the Bank of Canada in October. According to the latest data from Statistics Canada, Canada added 46,700 jobs in September, surpassing the market expectation of 27,000. Full-time positions increased by 112,000, the private sector saw a net increase of 61,200, while part-time positions decreased by 65,300. This data indicates a robust labor market resilience, and the unemployment rate fell from 6.6% in August to 6.5%.

Following the release of this employment data, the Canadian dollar quickly strengthened, and the market's expectation of a significant rate cut of 50 basis points by the Bank of Canada at its October 23 rate decision cooled. TD Securities stated that although employment data can be volatile, this unexpected strong performance weakened previous rate cut bets. However, TD Securities and the Bank of Montreal still believe that the central bank might cut rates by 25 basis points this month, adjusting the policy rate to 2.75%.

Meanwhile, the Bank of Montreal noted that although there was a recovery in the job market, businesses maintained a cautious attitude toward future hiring and wage growth expectations, and the increase in immigration has augmented the labor supply, alleviating pressure from labor shortages. In this context, the market will closely watch the upcoming September inflation data, which may provide more clues on the eventual rate cut magnitude.

Market participants generally believe that the Bank of Canada's monetary policy remains relatively close to neutral, starting from a lower point compared to the United States, making the interest rate decisions in the coming months particularly significant.

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